Market Commentary

27/07/20: Sugar Market Morning Report

Good morning,

Prices dropped again on Friday after strong Unica data for the first half of July. The market had opened 10 points weaker on the back of a negative macro picture before settling into a very narrow trading range for the morning. Prices dipped again in front of the Unica data but, a bout of short covering was seen after their release. However, this was short lived with prices soon slipping away during the latter part of the session to settle just 1 point off the lows. Again, the trading volume was poor just managing to push above 75k lot on the 29 point drop. The VH ended unchanged at -69 while the HK was another 3 points weaker at +13. London remained very quiet again with the structure weakening again. The VH slipped to settle at +2.90 while the HK was also slightly weaker at +0.70. However, with the weakness in NY the VV WP improved to settle at 97 while the HH WP was also slightly firmer at 79.00. Friday capped off a very quiet week as prices drifted lower on a lack of any substantial change in the fundamental picture.

Unica released their 1st half July data on Friday afternoon. It showed a large crush for the period of just over 46.5 million tonne cane crush which produced 3.02 million tonnes of sugar with a split of just under 48%. The data was generally in line with expectations. Cumulative total show that total crush for the season is running at 6.5% higher than last season at 276 million tonnes with sugar a massive 50% higher than the corresponding period last season at 16.3 million tonnes. The amount of cane used for sugar production is running at around 12% more than last season. This suggests that total sugar production could be over 32 million tonnes although the weather will be important in determining total production. It is dry at the moment which is aiding the harvest but will start to have an impact of it remain dry.

The COT report as of the 21st July showed that the funds/specs had increased their net long position by 9,695 to 81,322. The non-commercials increased their net longs by 6,123 to 62,085. However, with the 37 point drop in prices since the report means much of the increase may have been liquidated. The commercials increased their net short position by 8,776 to 323,588 as some light producer selling was noted along with some limited trade long liquidation. The Index funds cut their net long position by 919 to 242,266. The limited moves in the net positions of funds, specs and trade sum up the limited interest seen in the market at the moment.

This morning the market opened a couple of points firmer before improving another 10 points on some light speculative short covering. Prices are, currently, 4-5 points off the highs. The VH and HK are unchanged at -69 and +13 respectively. It has been a very sleepy opening in London with the VZ firmer at +3.3 while the HK is a tad weaker at +0.50. The macro this morning is mixed with crude slightly lower, equities higher and the USD weaker. The USD index is now at its lowest level since late September last year which is helping give a small lift to most agricultural contracts. The BRL settled around unchanged on Friday at 5.23. The market looks set to remain range-bound with reasonable buying noted below unchanged. However, it is likely selling will be found above 11.80 so the short term outlook is not too exciting at the moment with prices looking set to remain held within a narrow range with the USD weakness giving some support.

Contact the ADMISI Sugar Desk team:

Howard Jenkins, Charles Branch, Kevin Watkins, Steven Trigg

Phone: +44(0) 207 716 8598


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